% of bankroll to put in the stock market

[Fire Walker]

IMO one of the most underrated and unheralded investment opportunities are high yield bond funds. The bonds they buy are also called junk bonds which turns a lot of people off. It might seem very risky and it would be if you bought 2 or 3 bonds yourself instead of a fund. But the fund manager buys hundreds of bonds at better prices than an individual could get. If he has a few that flame out and default he generally also has a few that soar in value. The risk is considerably less than in most equity funds. My brokerage characterizes several of these funds as low risk. Of course, if there is panic in the bond market which happens from time to time they won't be unaffected. These funds are composed mainly of short term bonds which means they are less sensitive to interest rate fluctuations than long term government bonds. You could easily find a few that average about 6% over time. One of the funds I have has made money every year in the last 10 years except for 2008. And in 2008 it only lost 6.72% when the S&P 500 index dropped 37% after considering dividends.

When asked what [Buffet] thought of junk bonds he replied, "I think they'll live up to their name." (Sorry, couldn't resist).

[Fire Walker]

I've owned them for over 15 years and they've done just fine. No drama. I'll check back with you though after another 20 years. Anybody reading who has interest might want to research what other experts out there say. I'm referring to funds composed of hundreds of these bonds. I'm not saying an individual is wise to buy one or two or three bonds. Buffett (you spelled his name wrong) is known for his expertise in stocks, not bonds.

I've probably spelled a better man's name worse. I'm nearly 100% certain of it.

[Jabberwocky]

You'd trust a stranger with your finances? That's funny!

[Joe Mama]

The younger you are, the more (% of portfolio) you should have in stocks--diversified stocks, spread your bets around. The best time to get in is after a correction. I held my stocks and continued to buy more in 2008-2009 -- it felt like splitting 8's versus a ten, however both are the right thing to do. My portfolio has quadrupled + since then. One of my best investments now is deferring social security (8% per year guaranteed plus inflation adjustment for 4 years).

[Freightman]

Interesting point, and I think you are correct. The S.S. Administration says this:

According to data compiled by the Social Security Administration:

• A man reaching age 65 today can expect to live, on average, until age 84.3.

So, as a rough calculation ignoring the increased payments from inflation which would make the puzzle too complicated but would benefit an older person because the increases based on % would be greater:

If a man would get $2,000 per month at age 65 and he defers his payments until age 70 he will have forfeited $120,000 of income that he would have drawn between ages 65 and 70.

At age 70 he would draw $2,800 per month which is $9600 per year more than if he had taken the payouts at age 65.

The forfeited income of $120,000 if divided by $9,600 equals 12.5 Which means it would take him another 12.5 years to make up the income he forfeited by not taking the payouts at age 65.

Which would put him at age 77.5 And the S.S. data says that on average a many will who has reached age 65 will live to be 84.3 years old.

But if he dies sooner than average he just busted by hitting a 16 against a dealer Ace. And if he lives to an age greater than 84.3 then he drew a 10 on his double on 11 against a 10.

This is a rough calculation. It would be possible to make a much more complex reckoning but that is not for me. I'll leave that for the Mathletes here.

An excellent non blackjack post that everyone should pay attention to. Though the numbers are different for Canadians, the concept is exactly the same. It's mostly about when you're going to croak, and where the breakeven point is.

Not sure Wp when you can start taking social security in the US. In Canada, we can take Canada pension, at a discount, at age 60.if you live a long time, you're selling yourself short. If you're going to croak soon, take what you can get. There are obviously other factors in the equation, but this is the king and short of it.

[Morphy]

and make sure that your advisor is a "fiduciary"

[Gronbog]

But if you die early, then you didn't need the money anyway. I see deferred guaranteed benefits as a way to strengthen the safety net should you have the (mis) fortune to live longer than expected.

[Freightman]

The fact that the S.S. Administration will add 8% for each year that you defer seems generous and suggests to me that they are gaming the system; trying to influence you to defer. I suspect that they may have much more detailed data that indicates that those who claim early in general receive more net dollars. I'm not sure about this, but it seems logical.

That is very very interesting, and I would relook at the numbers. Payments need to be supported by growth in funds created fir this purpose. The nature of these funds is such that speculative investments with higher potential returns, and greater risk of loss, are avoided for lower return funds with more stability. Accordingly, to pay 8% bonus per year on funds earning, for the sake if argument, 5%, seems more than a bit silly.

Remember one thing. The formula listed above us, if accurate, is a recipe for disaster. The smaller you are, the quicker it us to the day if reckoning. The bigger you are, the longer it is to that day, but it does come.

I don't know if the US has a seoerate fund designated fir Social Security, or if payments come from general revenues. Regardless, an imbalance, wherever, has to be addressed.

[ZeeBabar]

Ok, so you get $120k less if you take SS at age 65 as opposed to 70. Now, as I am doing, if I play BK with my SS and make $120k in 5 years, I come out ahead!

[Freightman]

3
Nice post. You've done a favour for most on the forum.
Further, individual tax rates should be taken into consideration.

[ZeeBabar]

I opted to claim mine at 66 cause I was working full time. This meant, I would pay taxes on my SS income plus I knew of no way I could securely get 8% interest each year.

[Joe Mama]

there is one more consideration which tilts in favor of claiming early which no one mentioned and i just found out about today in researching my own benefits. s.s. payouts are adjusted each year upward by what they call a COLA in order to offset inflation. they make some abstruse calculation to determine how much the increase is or if there is any increase. however, that increase is only applied to somebody who is ALREADY receiving benefits. it is not applied to a person's estimated benefits. so, when comparing benefits at age 62 to 70 the difference is not as great as we have been calculating because the person who claims benefits at age 62 is eligible to receive a COLA every single year between 62 and 70. it's worth repeating again: the difference in the size of the payout is not as great as many assume. so, if at age 62 they estimate your payout at age 70 to be $2500 that estimate will not change when you actually reach age 70. And obviously, the buying power of $2500 will usually decrease by a great amount in 8 years.

Think you may need to read the social security calculation rules thoroughly on their website before giving advice. Your earnings for each year that goes into the calculation is indexed for inflation, the indices are recalculated each October. I am 68 and have not chosen to take my ss retirement -- the calculations I get from social security reflect both the 8% per year increase after full retirement age (in my case 66) and any COLA adjustments.

[Joe Mama]

I apologize for being so gruff in my response